Why Are Alibaba Shares Trading Lower Premarket?

  • The U.S. government is reviewing e-commerce giant Alibaba Group Holding Ltd's BABA cloud business to determine whether it poses a risk to U.S. national security, Reuters reports.
  • The U.S. focuses on how Alibaba stores U.S. clients' data, including personal information and intellectual property, and whether the Chinese government could gain access to it. 
  • The U.S. is also concerned over the potential for Beijing to disrupt access by U.S. users to their information stored on the Alibaba cloud.
  • The report noted that a small office within the Commerce Department known as the Office of Intelligence and Security leads the probe into Alibaba.
  • Alibaba, the world's fourth-largest cloud provider according to Canalys research firm, has ~4 million customers and describes its cloud business as its "second pillar of growth." It saw a 50% rise in revenue to $9.2 billion in 2020, though the division accounts for 8% of overall sales.
  • Price Action: BABA shares traded lower by 3.78% at $126.60 in the premarket session on the last check Tuesday.
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